Kiwoom Securities on the 29th said Samsung Electronics' operating profit in the second quarter will come in lower than initially expected. It noted that semiconductor results will improve on rising memory prices, but a larger-than-expected reflection of provisions for performance bonuses will likely push results below prior estimates.
Park Yuak, an analyst at Kiwoom Securities, maintained a "buy (BUY)" rating and a target price of 4.3 million won for Samsung Electronics on the day. However, the second-quarter operating profit forecast was lowered to 89 trillion won from the previous 100 trillion won.
Park said, "Samsung Electronics' second-quarter results this year are expected to miss our previous forecast (operating profit of 100 trillion won), with revenue of 183 trillion won and operating profit of 89 trillion won," adding, "The price increases of standard DRAM and NAND are expected to slightly exceed initial expectations, but the amount reflected as a provision for performance bonus expenditure is judged to be even larger than expected."
The semiconductor (DS) division was expected to see continued improvement on the back of strong memory prices, but the foundry and System LSI businesses were projected to recover more slowly than hoped. The company initially expected a swing to profit helped by expanded production of HBM4 base die and Exynos 2600, but it now forecasts continued losses due to one-off expenses and sluggish utilization in 8-inch lines.
However, it viewed that the stock impact would be limited because this downward revision is driven more by the timing of expense recognition than by a deterioration in fundamentals.
Park explained, "While second-quarter operating profit is expected to fall short of initial expectations, the impact on the stock price is likely to be limited," adding, "That is because it depends on the timing of recognizing provisions for expected performance bonuses, and there is little change to our 2026 earnings outlook."
In the second half, expansion of market share in HBM4 and enterprise SSDs (eSSD) is expected, while the rise in market share of Chinese memory companies is also set to get underway in earnest, which could increase stock price volatility.
In the third quarter, it projected revenue of 206 trillion won and operating profit of 114 trillion won, in line with market expectations. Although rising prices for memory, central processing units (CPUs) and substrates are leading to higher PC and smartphone prices, the burden of higher prices is making client companies somewhat more conservative about additional memory purchases, so it judged that the second-half memory price increase will find it difficult to far exceed prior expectations.
Park said, "In the second half, the momentum of rising market share in HBM4 and eSSD and concerns about rising market share of Chinese memory companies will coincide, expanding Samsung Electronics' stock price volatility."